Late Thursday the governor of the Iraqi National Bank went on Iraqi TV to announce that the National Bank will be buying the dollar for 1350 dinars (250 dinars more than the market price) in an attempt to level the dinar and slow down its rise. All exchange shops adjusted their prices accordingly and on friday the exchange rate was between 1350 and 1380.
A reader sent me an email telling me that I shouldn’t be too glad about a strong dinar since this has a negative effect on exports. The thing is that we are at the moment at a point where we import much more than we export and this trend should increase once the reconstruction phase starts and the monies from the donor conference in madrid are released. The only thing we export is Oil and, I am guessing here, that market has its own rules it won’t be affected by the changes we are going thru now.
What is important is that the poeple feel that is worth something and believe me for somone who gets his paycheck in dinar this is improvement. What we need now is for the dinar to stay put at a price and stop moving, and I guess this is what the governer intended to do with his announcement on thursday. Today is the first working after the announcement and we’ll see how the market reacts to his Bank’s dollar price.